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How To Negotiate House Prices After COVID-19

Jennifer Birtles 30th May 2020 One Comment

Reading Time: 7 minutes

Coronavirus has had so many negative impacts on our economy. It’s forced businesses to close and lenders to implement new strategies to handle the changes. That means the property sector has taken a massive hit. House prices are incredibly uncertain now – so if you’re planning on buying a home soon, should you negotiate?

The pause in the housing market is over – but what this means for those already in the process of buying a home, and new buyers, remains to be seen. It’s too early to tell exactly to what extent house prices have been affected in the long-run, experts expect a drop between 5 – 10% on asking prices.

As people’s financial situations have changed with furloughs and redundancies it’s becoming harder to get a mortgage. However, the slump in the market makes it an ideal time for buyers to consider negotiating to afford their dream house.

Coronavirus and Mortgages

Coronavirus will affect house prices

Your eligibility to get a mortgage after coronavirus may have changed. Lenders look at your earning history for their affordability assessments. So, if you’ve been furloughed, made redundant, or had any other changes to your income, this affects your borrowing potential. Even if you had been previously budgeting for a larger mortgage, or had an Agreement in Principle before the pandemic hit, what you can buy now (compared to The Before Times) may differ.

Wary Lenders

Many lenders are hesitant to give mortgages at the moment. Many of the cheapest deals have been pulled off the market lately. Notably, the ones lenders pulled are low-deposit mortgages, where you could borrow up to 95% of a property’s value.

This hesitant attitude is further worsened by the furlough scheme. Large numbers of workers currently on furlough face redundancy in the next few months if their company can’t stay afloat. Banks don’t want to offer mortgages to those at high-risk of defaults. Add to that the recent mortgage holiday scheme, which means banks are tight on their profit margin, and it’s a recipe for a tough time for any mortgage applicant.

Your lower income

If you’ve been furloughed, your 80% salary will be taken into account when it comes to a mortgage application. If your salary is being topped up to the full 100%, lenders will (usually) treat it as if you’re not on furlough. It’s best to speak to a mortgage adviser before making an application if you’re not sure what to do.

Buying Deals

From Shared Ownership to Lifetime ISAs, the Government offers first-time buyers ways to get on the property ladder. Your local authority may also offer a special scheme in your area for former social housing, so it’s worth checking their website too.

A Buyer’s Market

As more buyers struggle to get mortgages, house prices are likely to drop to reflect the lack of people buying property. While there will still be houses for sale, the lack of people realistically able to buy will lead to a market drop in prices, expected to be by at least 5%. So, it’s not time to panic yet! You may not be able to get the full mortgage you’d planned – but as house prices drop as well, you could still get the home you want.

The market dip also gives you a lot more negotiating power. It depends on the location you are looking to buy, but if there are no other buyers interested in the property you are after, the vendor will be a lot more likely to sell their property for a lower price than risk not being able to sell it at all.

Who works for You?

Negotiating house prices is tricky without help from professionals

Your mortgage broker

It’s always worth getting advice from an independent mortgage advisor. They’re not tied to any particular bank or lender. That means they only act in your best interests. They’ll have access to LOADS more mortgage deals than you’d be able to find yourself.

A mortgage broker also handles the paperwork for you, to maximise your chances of getting a decent deal. They’ll let you know if your borrowing ambitions are realistic – and how you can improve your chances of getting a mortgage. Brokers have great relationships with lenders, too – so rather than a computer deciding on the deal, they can often act as an intermediary with a Real Life Person at the lender. This means that, with situations like furlough, you could have a better chance of lenders accepting your current personal circumstances.

The surveyor

Before you buy any property, pay to have a housing survey done. This will set you back a couple of hundred pounds – but is an age-old way to knock thousands off house prices when it’s time to negotiate. A surveyor delivers an impartial report about the property’s condition and potential issues, like flooding. Use this report to say to the vendor that more work is required than expected – and so the price needs to be lower to reflect that.

The estate agent

As friendly as they may seem, the estate agent is NOT acting in your interests as the buyer. They’re there to get the vendor the best price possible. Many work on a commission basis too – so the higher price they can negotiate, the more cash they’ll be paid for their fee.

The estate agent may tell you there’s been lots of interest in the house – but don’t listen to that. It’s a classic pressure sales technique. If the vendor is already considering another offer (but hasn’t accepted yet), the estate agent must tell you that – though they don’t have to tell you the price.

How to Haggle for the Best Price

Negotiate house prices to get the best deal

So, how do you negotiate house prices to get a great deal? Follow these tips!

Do Your Research

Research other house prices in the area you’re considering. Use Rightmove or Zoopla to look at how many other properties are on the market in this area, and pay attention to recently sold properties that are similar to the one you want. This gives you a comprehensive idea of how much you will be expecting to pay, and realistically how much leeway you may have to negotiate.

These websites also show the average property price in the area, including the percentage change. This is handy information to arm yourself with: if similar properties in the area have dropped by 5%, you could haggle 5% off the asking price.

Consider the Seller’s Intentions

What the vendor plans to do after selling up can have a big impact on how much you are able to negotiate. It’s easier to haggle if you know what position they are in.

If they’re looking to buy another property, then they need a minimum amount from the sale to be able to afford their property purchase. However, if the seller is moving in with a partner or family, or is an elderly person looking to go into care, then you can afford to haggle harder as there isn’t a set price they need to meet.

Houses that have stood empty for a long period of time – such as bereavement properties or former buy-to-lets – also give you haggle power. House prices are easier to negotiate if the seller hasn’t been able to get rid of the property for a while. It costs them to keep the property, even when it’s empty, so it’s in their interests to achieve a quick sale.

In very sad circumstances, the outbreak of coronavirus has led to an increased number of chain-free houses due to the increased death rate leading to more bereavement properties. Getting a probate property to the buying stage can take months – which puts you, the buyer, in a strong position if you can afford to wait. Many buyers want a quick purchase so aren’t willing to wait the several months it can take.

Being Chain-Free

Being chain-free yourself gives you the upper hand in negotiating. First-time buyers have an advantage as they have aren’t relying on any other sales to go through before they can close the deal. A first-time buyer purchasing an empty property is the absolute ideal situation for everyone!

However, if you’re upgrading or relocating from a property you already own, you can still make yourself chain-free. Selling your property without the one you want to buy as part of the chain can be risky – but also a good opportunity to wait out the rocky market. If you need to relocate right away, rather than waiting to see if prices will rise, consider selling now and moving into rented accommodation on a short-term lease. This gives you the same flexibility as first-time buyers – with the hefty cash injection from your house sale boosting your chances of getting a decent mortgage for your next property, too.

Don’t Be Put Off

Don’t let a refusal put you off – the sellers may try and see if they can push you higher. Keep communicating with the estate agents. Even when you’ve reached your offer limit, stay in touch. In a quiet market there’s a high chance the agent will come back to you.

Haggle Hard

A rough guide post-COVID is drop your offer by 10% and work it back up from there. Normally, around 2% under the asking price is standard. At the moment, ask for more! People’s uncertainty about house prices plummeting in the near future could work in your favour and give you a good deal.

More useful reading

Need more info about getting a mortgage, selling your current property, or how to buy a house? Look no further than these articles below for help!

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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3 years ago

Nice article

Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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